The cannabis industry has had more than its fair share of alleged frauds and deceptions, with most investors being familiar with the roller coaster that has been the Aphria LATAM accusations. However, another giant in the industry has come under fire as former investors issued a lawsuit against MedMen Enterprises (CNSX: MMEN) for alleged breach of fiduciary duty. In response, MedMen responded in a press release calling the lawsuit “meritless.”
One of MedMen’s largest outside shareholders, as well as a former board member, filed a lawsuit and complaint against Andrew Modlin, Adam Bierman, and other MedMen enterprises personnel for withholding corporate shares from shareholders. Brent Cox and Omar Mangalji, owners of The Inception Companies and MMMG-MC Inc (which holds a large stake in MedMen’s management entity) came out yesterday to publicly accuse MedMen of fraudulent activity.
“Simply put, MedMen is a publicly traded company that is withholding its shares from its shareholders,” said Omar Mangalji. “Management is using conflicted corporate structuring in breach of its fiduciary duty to its shareholders.”
The two shareholders ended up filing a complaint with the Los Angeles Superior Court, which ended up denying their request for a temporary restraining order and preliminary injunction partially because the charges seemed without much merit.
“This is a meritless claim by a minority investor. This is clearly and egregiously an attempt to devalue the shares of the enterprise for their own personal gain at the expense of all other stakeholders. MedMen remains focused on building one of the leading cannabis companies in the world and we feel confident we will prevail on that mission and against this meritless complaint,” said MedMen’s Senior Vice President of Corporate Communications. “These are frivolous claims, and it appears the judge agrees…Despite the agreement reached by an independent committee to safeguard the best interests of our shareholders, including MMMG and the funds, the plaintiff; Omar Mangalji and Brent Cox, now seek special treatment.”
He went on to say that Manglaji and Cox received cash payments representing a total return of their original capital plus a significant extra margin. The MedMen official also noted that shareholder feedback during the process was overwhelmingly positive.
In response to the news, MedMen shares plunged 6.7 percent today, despite the good news from the Superior Court.
MedMen Enterprises Company Profile
MedMen Enterprises is a leading cannabis company in the U.S. with assets and operations across the country. Based in Los Angeles, MedMen brings expertise and capital to the cannabis industry and is one of the nation’s largest financial supporters of progressive marijuana laws. – MedMen Enterprises
The Inception Companies Company Profile
The Inception Companies (“Inception”) is a private opportunistic investment firm based in Los Angeles and London with significant operating and investing experience across numerous industries, including regulated cannabis. Inception and its affiliates have deployed capital in leading consumer retail brands, agricultural & industrial operations, technology platforms, and real estate assets representing over $2 billion in aggregate enterprise value. Inception’s principals have over 60 years of combined investing and operating experience at prominent investment banking, private equity, real estate, and venture capital firms. –The Inception Companies